Snap warns insurrection, Apple could slow ad sales momentum

Snap said revenues were off to a slower start in 2021 after some brands curbed digital advertising spending in January amid US political turmoil. 

Sales at Snap, the parent of messaging app Snapchat, rose 62 per cent year-over-year to $911m in the fourth quarter of last year, far surpassing analyst expectations of an increase to $855m, it said on Thursday.

But Derek Andersen, Snap’s chief financial officer, said that he was “conscious that external factors may emerge that could impact our momentum” in the year ahead.

The first quarter began more slowly than anticipated because the company “experienced a period of interruption to advertising demand in the first two weeks of January”, as advertisers paused campaigns around the insurrection at the US Capitol by a pro-Trump mob.

Some big brands including Mars briefly cut spending to ensure their ads were not placed near violent rhetoric and misinformation on social media platforms. In mid-January, Snap joined Twitter in permanently banning former US president Donald Trump from the platform over fears he could wield it to incite unrest.

Mr Andersen also said forthcoming privacy changes to Apple’s iOS 14 operating system could impact the business in the short term, since they will make ad targeting and tracking more difficult, but added that it remained unclear what the longer term effect would be.

Snap is guiding for year-over-year revenue growth of 56 to 60 per cent, he said, and first-quarter revenues of around $720m to $740m. Shares fell as much as 9 per cent in after-hours trading.

Net losses in the fourth quarter shrank by more than 50 per cent to $113m. 
The company also said it had reached its internal goal of full-year adjusted ebitda profitability in 2020 with adjusted ebitda of $45m. 

The company put the strong fourth-quarter revenue growth down to rising interest in its augmented reality offering and recent investment in new ad formats and capabilities for its marketing clients. It said daily active users rose 22 per cent to 265m in the fourth quarter.

Snap also said that the Spotlight tab, its answer to TikTok’s scrollable short-video feed, has gained 100m users since its launch in November. The company has been encouraging creators to submit content to the feed, which it curates, splitting $1m a day between those that get the most hits.